Following the entry of a discharge in 2011 of his Chapter 13 case, First Federal Bank (“FFB”) continued to report on Mr. Myrick’s credit report with Equifax that he owed an outstanding balance of $41,603 that was past due by $2,000. In November 2014, Mr. Myrick submitted a dispute with Equifax regarding this balance, raising his bankruptcy discharge. Equifax sent a Automated Consumer Dispute Verification (“ACDV”) to FFB, which responded that the balance information was correct. Later in February 2015, Mr. Myrick again disputed the FFB trade line, this time attaching a copy of his discharge order. As the discharge order does not specifically list discharged claims, Equifax requested additional details regarding the account names, numbers and nature of the dispute. Mr. Myrick did not provide that information, instead commencing suit against FFB and Equifax for violations of the FCRA and the NC UDTPA. FFB then corrected the trade lines and entered into a stipulated dismissal with Mr. Myrick. (Unfortunately, the terms of that stipulated dismissal were not disclosed.)
In his first cause of action, Mr. Myrick asserted that Equifax negligently and willfully violated 15 U.S.C. § 1681e(b) by issuing an inaccurate credit report that did not reflect that the debt on the FFB account was discharged. In response, Equifax moved to dismiss, not because the reporting was accurate, but instead on the grounds that Mr. Myrick did not demonstrate that Equifax neglected to follow reasonable procedures to assure maximum accuracy. The district court held that:
While the reasonableness of a CRA’s procedures is ordinarily a question of fact, the implementing regulations for the FCRA explain that a CRA follows reasonable procedures where it relies on “information that it receives from a source that it reasonably believes to be reputable” unless “the information furnished appears implausible or inconsistent” or the CRA has some notice of systemic problems with the accuracy of information from a particular source. Jianqing Wu v. Trans Union, No. AW-03-1290, 2006 WL 4729755, *7 (D. Md. May 2, 2006) (citing Commentary on the Fair Credit Reporting Act, 16 C.F.R. pt. 600 app.))
Equifax submitted, through affidavit, evidence that FFB is a “reputable and experienced source of information,” requiring some evidence from Mr. Myrick that such reliance was unreasonable. Mr. Myrick argued that the admission by Equifax that it was notified and aware of his bankruptcy and discharge was sufficient. The district court, however, found that, since the discharge order does not lists which debts were discharged and includes disclaimers that “[m]ost, but not all, types of debts are discharged” and “[b]ecause the law is complicated, you may want to consult an attorney to determine the exact effect of the discharge in this case” , Equifax could reasonably rely on FFB as the alternative would be an unreasonable burden of paying “the costs of hiring trained legal specialists to examine court records to determine whether there is potentially inaccurate information in a consumer’s credit report.” See Childress v. Experian Inf. Sols., Inc., 790 F.3d 745, 747 (7th Cir. 2015). Accordingly, summary judgment was entered on this claim.
As his second cause of action, Mr. Myrick contended that Equifax negligently and willfully failed to conduct reasonable reinvestigations into his disputes and correct the inaccuracy in his credit report as required by 15 U.S.C. § 1681i(a), with Equifax arguing that it complied with its obligations by using the ACDV.
In determining whether Equifax’s procedures constituted a reasonable reinvestigation under § 681i(a), the district court weighed two relevant factors:
(1) Whether the consumer has alerted the reporting agency to the possibility that the source may be unreliable or the reporting agency itself knows or should know that the source is unreliable; and (2) The cost of verifying the accuracy of the information against the possible harm of reporting inaccurate information.
See Jianqing Wu at *7.
It was uncontested that Mr. Myrick met the first criteria when he alerted Equifax of the unreliable information with his two dispute notices, but as to the second, Equifax again argued that it should not be required to hire legal experts to review legal documents to determine their significance and impact on consumer’s credit files. Here, however, the district court held that despite the potential costs of a deeper investigation into the public records in Mr. Myrick’s bankruptcy case, a jury could reasonably find that the failure to investigate was negligent (but not willfully noncompliant), particularly as the debt to FFB was not likely among the list of commonly nondischargeable debts.
A better practice when disputing debts that continued to be reported on credit reports following discharge is to include not only a copy of the discharge, but perhaps also the applicable schedules and, following a Chapter 13, the Trustee’s Report of Filed Claims. This would further pressure the CRA to investigate the debt.
It is also fair to wonder, given that First Federal Bank clearly was in error in the information it provided, whether Equifax has now removed First Federal Bank as a source of information that is “reasonably reliable based on the source’s reputation in the community, its own investigation or Equifax’s longstanding business relationship with it.”
In future cases, a useful discovery request to Equifax would seek details regarding how many trade line disputes the specific credit furnishers has been involved with, what credit furnishers Equifax has ever removed from its “trusted list” and the reasons for such removal, whether Equifax correlates its “trusted list” with consumer complaints lodged the CFPB or other regulatory agencies, etc. Otherwise, the “reasonable reliance” by Equifax would seem to simply be that it trusts financial institutions but not consumers.
For a copy of the opinion, please see: